site.btaMedia Review: November 15

ECONOMIC SLOWDOWN

Capital Daily reports the Bulgaria’s economy continues to slow down and GDP growth contracted to 1.7% in the third quarter of 2023, year-on-year, down from 2% between April and June. The quarter-on-quarter growth is 0.4%. Between June and September GDP totalled BGN 47.7 billion at current prices. Consumption accounts for 78% of it and investments for around 18%. Exports outstrip imports by nearly BGN 2 billion or around 4% of GDP. 

After the strong performance in 2021 when the economy grew by 7.7% the pace is slowing down with the recovery boom after the pandemics. This is coupled with the effects of the high inflation which eats away at the purchasing power of households and stunts consumption. The weak economic activity in Europe has decreased demand for Bulgarian production on the international markets. Between July and September the industrial production index is some 11% below last year's levels, and construction has also contracted from 2022. 

However, against the backdrop of stagnation in the EU (zero growth for a second consecutive quarter and contraction to 0.1% on an annual basis) Bulgaria is performing well. Only four countries (Cyprus, Romania, Portugal and Spain) report slightly higher GDP growth compared to Q3 2022 - all within the 1.8-2.2% range. And nine have declines. 

Despite continued price growth, consumption remains the main driver of the economy. It increased in real terms by 6.1% year-on-year, even strengthening compared to the previous few quarters. This is not entirely surprising given that inflation fell to around 7.5% during this period, while incomes have continued to rise, with wages according to the statistics up by nearly 15% on average over the past year. However, high consumption growth is in turn a pro-inflationary factor. 

In effect, economic growth in the third quarter, if unchanged, will be the first below 2% since the end of 2014, excluding the declines during the pandemic.  

2024 DRAFT BUDGET

Cross.bg quotes former economy minister Nikolay Vassilev as saying in a televised interview that Finance Minister Assen Vassilev is the man who came up with the whole macro framework of this budget. "His whole ideology boils down to this: take on as much debt as possible, spend as much as possible and the more we spend, the better. That's his whole economic philosophy." 

In his words, this wis wrong and harmful for the future of the nation.  

"I am glad that all the former finance ministers who have taken the floor are against the whole macro framework of this budget," he said.  

According to him, the revenues that are budgeted are unrealistic. "It budgets BGN 2.4 billion from gas transit revenues; secondly - the money from the National Recovery and Resilience Plan. Who said it would arrive next year? Third - tax revenues have been overprojected. This year revenues are minus a few billion, and next year?", Vassilev asked. 

Vassilev is convinced that the deficit won’t be 3% of GDP.  

"Asen Vassilev personally told me in 2021 that he was against joining the eurozone. Where is the government's information campaign? I don't believe it is that important for the government to join the eurozone," said Vassilev. 

“Either the parties will betray their essence and support whatever budget for the seventh time, or they will wake up and take another kind of responsibility. I hope it is the latter," he concluded. 

***

TrudNews writes that the state debt will grow by more than BGN 26 billion in just three years, according to estimates of the Finance Ministry in the draft budget for 2024. From the beginning of next year, the Finance Ministry is raising some taxes and tightening the rules, such as banning cash payments of more than BGN 5, 000. 

The reason for the increase in the public debt over the next three years is the planned deficit in the state treasury. For 2024 the budget deficit is planned to be over BGN 6.2 billion. And in 2025 and 2026, in order to cover all the planned expenditures, the budget deficit will be BGN 6.4 billion and nearly BGN 7 billion respectively. 

The maximum amount of new government debt that can be raised in 2024 is up to BGN 12.7 billion, which provides for the issuance of government securities (T-bills) on domestic and international capital markets, as well as for the conclusion of structural programme loans of up to EUR 500 million (BGN 0.98 billion) with the European Investment Bank (EIB) and the Council of Europe Development Bank (CEB). 

Debt financing of BGN 11.9 billion leva is planned for next year, the Finance Ministry said. BGN 3.5 billion are earmarked for refinancing of the outstanding debt. The remaining part of the debt financing of BGN 8.4 billion is intended to finance the planned deficit on the state budget and secure available funds in the fiscal reserve, the Finance Ministry. On the basis of the planned debt operations, the maximum amount of the state debt at the end of 2024 is expected not to exceed BGN 49 billion. In 2025 and 2026, the planned new borrowings amount to BGN 11.6 billion and BGN 11.7 billion per year, respectively, with the outstanding debt to be refinanced amounting to BGN 3.6 billion and BGN 2.8 billion in 2025 and 2026, respectively. As a result, at the end of 2025 and 2026, government debt is projected to reach BGN 57.2 billion (26.3% of GDP) and BGN 66.5 billion (28.8% of GDP), respectively. 

***

Speaking on Nova TV, MP Delyan Dobrev of GERB said that GERB will not support Assen Vassilev's budget and will return it to the Finance Ministry if it is submitted as it is. Some BGN 40 billion in tax revenues are projected, while the realistic figure is BGN 35 billion. According to Dobrev, now the state is two or three times richer than in 2009, when the budget was defined as a "lean pizza", and the state should invest in infrastructure to become richer in the future. 

Continue the Change will be happy with every month of derogation for Lukoil. It's not true that petrol will go up in price, if the derogation is waived. The European Commission publishes a statement every month. There are now 10 countries with cheaper petrol than Bulgaria, among them Austria, Belgium, Croatia, Greece, Poland. A day before the war petrol was cheaper only in Malta. And if Lukoil decides to raise prices, Bulgaria can appoint an administrator of the company," Dobrev added. 

He also revealed the majority in the parliamentary energy committee, which protects the interests of Lukoil - Continue the Change, the Bulgarian Socialist Party and Vazrazhdane.  

According to Dobrev, it would be good to collect BGN 2 billion from Gazprom for gas transmission via the Balkan Stream pipe, but the question is whether this complies with European directives.  

"I wonder how they will collect the fee. If it happens, the pipe will be paid off in 1 year. And they protested against it. Now it has become nice," Dobrev said. 

PROBE INTO SUPREME JUDICIAL COUNCIL ELECTION

Mediapool.bg writes that the Sofia City Prosecutor's Office has launched an investigation into alerts of violations in the election of six judges as members of the judicial quota in the Supreme Judicial Council, held in June 2022. 
  
Quoting Dnevnik.bg the outlet writes that the complaint was filed by the Anti-Corruption Fund in the summer with allegations that during the voting in the building of the Supreme Administrative Court (SAC) there was an illegal access to the electronic voting system. 
  
The prosecution is checking for a computer crime, tasking the Counter-Corruption Commission and the Directorate for Combating Organized Crime. 
  
Already into the fourth month the prosecutor's probe has not yet been completed, but new suspicions have accumulated in the meantime. 
 
Two judges have managed to get hold of long-kept information that provides key evidence of possible manipulation of the recent elections of members of the Supreme Judicial Council (SJC) from the judicial quota. Eight times fewer judges entered the Supreme Administrative Court building on the day of the vote than the number who voted in the courthouse. 
  
This has transpired from the response of the Ministry of Justice to a query by judges Vladislava Tsarigradska of Pleven District Court and Atanas Atanasov of Sofia City Court. In a comment to Mediapool.bg, the SAC doubts the credibility of the information presented by the ministry. 
 
The two magistrates were able to obtain information from the Justice Ministry that a total of 28 judges had entered the SAC building for the two days of the election for members of the SJC. Meanwhile, 200 judges voted in person and electronically from a single IP address in the court building. 
  
In all likelihood, it was also done from the same computer as votes were cast within a few minutes at the same time of the day, it was revealed from the testimony of the experts in the case of the cancellation of the SJC election results earlier this year. The court dismissed the complaints seeking to cancel the vote. 
  
Later, parliament amended the law to nullify the vote because of expected constitutional changes that will reform the SJC. 
In a comment to Mediapool, the SAC commented that the Ministry of Justice has given two different answers on the same case - once that it has no information and the second time it gives detailed information. 
  
The SAC added that the conclusions were drawn only on the basis of the second response given by the Justice Ministry under the Access to Public Information, which were described as "biased". 

ENERGY

Bulgaria must draw up a diversification plan in order to waive Russian energy imports by 2027, said EU Energy Commissioner Kadri Simson quoted by Bulgarian National Radio during the Sustainable Future Week organized by Politico in Brussels. Simpson strongly criticized Hungary and urged it to increase its efforts to stop buying energy from Russia. She said this leaves the country vulnerable to malign Moscow influence. 

On Wednesday, the European Union is expected to announce the 12th package of sanctions against Russia. 

***

A cover report by the Bulgarian National Radio says that a number of high-intensity, energy-intensive enterprises in Bulgaria are facing the threat of curtailing or closing down production due to high electricity prices.  
  
The 2024 budget does not provide for energy compensation for businesses. There is also no provision for hospitals, schools, kindergartens and other non-domestic consumers. 
 
Meanwhile, electricity prices are going up and this spell serious problems on the European markets in the winter months because it will affect not only the competitiveness of the economy but will also lead to higher prices for consumers. 
 
Will Parliament extend the anti-crisis measure for energy support to industrial and non-domestic consumers beyond January 1, as demanded by businesses, or will the severe scenarios for the economy be confirmed? 
Bulgaria risks entire economic sectors to be thrown out of the market because of next year there are no compensations for businesses and all non-household consumers for the high electricity prices that are forecast for the coming months. There are provisions in the budget on taxing the excessive profits of electricity companies, but without explicitly saying that the money will be used for energy support for the industry, hospitals, schools and kindergartens.  

The problem was highlighted a few days ago when the business announced that it would insist that the compensation for high electricity prices, which expires at the end of the year, be extended next year.  
  
In a letter to the Energy Minister and the parliamentary energy committee, Bulgarian employers explain that the European Commission C has already proposed to extend the temporary crisis measure for state aid until 31 March 2024, or even until the end of 2025, because of indications of a new spike in electricity prices. 

We can expect drastic collapses in metallurgy, chemistry, extractive industry, manufacturing industry, if electricity prices are not stabilized and if they are not compensated, Bulgarian Industrial Association Chairman Dobri Mitrev told BNR. Not only business will be threatened, but also jobs and the whole society, he added. Bulgarians cannot afford higher prices, Mitrev is adamant.  

The business urges for extension of the existing mechanism so far - 100% compensation from the Electricity System Security Fund if average monthly exchange prices for electricity exceed 200 BGN per MWh.

ROAD SAFETY

Sega.bg writes that the Interior Ministry will blacklist repeat traffic offenders. The Ministry will set up a database of drivers who repeatedly violate traffic rule by using the Traffic Police system and footage from municipal surveillance cameras and those of the Road Infrastructure Agency. The decision was made during a working meeting of acting Prosecutor General Borislav Sarafov, Interior Ministry Chief Secretary Zhivko Kotsev and National Revenue Agency head Rumen Spetsov.

Prosecutors across the country and the Traffic Police will have to identify drivers whose offences are recorded and uploaded on various social platforms in order to be sanctioned. Also, the National Revenue Agency will check the owners of expensive vehicles where the origin of their incomes may be from illicit activities.